Six Pitfalls of Retirement Investing
When it comes to investing for retirement, mistakes can thwart your goals faster than a bear market can. Following are six common mistakes investors make. Are you guilty of any of them?
To reach a goal, you have to have one. Think about what you want to do in retirement and how much money it will cost. Having a monetary goal will help you focus on investing enough to attain it.
Failing to Diversify.
If your portfolio isn’t diversified, you could be putting your savings in jeopardy. Investing in many different investment types and economic sectors is the best way to manage overall risk.
Not Contributing the Maximum Amount Possible.
Remember that every dollar you contribute to your employer’s retirement savings plan from your salary reduces your current income for tax purposes. By contributing the maximum amount to your plan, you’ll be boosting your retirement savings and saving on taxes.
Not Taking Maximum Advantage of an Employer Match.
If your employer offered you extra pay, wouldn’t you take it? Failing to contribute at least as much to your plan as your employer matches is like turning down “free” money.
Borrowing From Your Plan.
Yes, the interest rate may be low and you are paying the interest to yourself, but as long as the money you’ve borrowed is not invested, you could be missing out on some potentially great earnings. And, if you fail to pay back the loan, you’ll owe taxes and penalties.
Cashing Out Your Account If Your Job Changes.
If you don’t roll the payout over to an IRA or another tax-deferred plan, not only will you owe taxes and penalties, but you’ll also lose out on potential tax-deferred growth of your retirement assets.